The U.S. Department of Labor’s regulations include an exemption for highly compensated employees. Because California law does not contain a similar exemption, the exemption is only relevant for California employers in the rare circumstance where an employee is exempt under California law, but not under the federal Fair Labor Standards Act.
The exemption is found in 29 CFR section 541.601, which provides that an employee with total annual compensation of at least $100,000 is exempt if the employee customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee. The compensation must include at least $455 per week paid on a salary basis. The employer may choose any 52-week period for calculating the total compensation. Further, if the employee has not earned $100,000 during the 52-week period, the employer has a month after the close of the period to make up the difference. An employee who has worked only a portion of a year is exempt if he or she earns a pro rata portion of the $100,000.

Employers that are not considered local retail or service establishments (and hence cannot qualify for the commissioned employee exemption under the FLSA) should consider whether their commissioned employees can be considered exempt under the highly compensated employee exemption. For an example of a court applying the exemption to employees of a broker-dealer that provided investment banking and investment services to high-net-worth individuals, see In re RBC Dain Rauscher Overtime Litigation, 703 F.Supp.2d 910 (D. Minn. 2010).

Gutierrez Preciado & House, LLP is located in Pasadena, CA and serves clients in and around Woodland Hills, Wilmington, Harbor City, Carson, Torrance, San Pedro, Long Beach, Compton, Gardena and Los Angeles County.

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